Sourcing and manufacturing professionals from five diverse apparel firms made it clear in Apparel's 2nd annual Sourcing Roundtable discussion that balance is the key to successful sourcing strategy.
They emphasized that sourcing is not all about price, stressing the importance of established relationships with vendors and contractors who are familiar with their processes and systems, and have a history of reliable delivery. Yet at the same time, they pointed to price pressure as an economic challenge facing almost every apparel business. As Lisa Carter-Knight of Timberland put it: If you don't put price into the equation, it's not reality.
There was some consensus among participants that quotas would not be lifted entirely in 2005 because of U.S. legislation and safeguards.
Here are some highlights from the discussion.
The importance of quick turns
Apparel: How is your sourcing department evolving and your company positioning itself with regard to global sourcing shifts? After quotas phase out, is it all going to be about price?
KRUMMEL (TIMBERLAND): The low-cost nations, China, India, etc., are definitely going to be a bulk of where things are produced and sourced, but I absolutely believe in regional sourcing just from a flexibility standpoint. My perspective is from a brand, where it's not all cost-driven. We have this extra room in the strengths of our brand, so the flexibility is the important key for us, such as in small minimums, turnarounds and replenishment and inventory consideration. We are looking to partner with factories that may have a global presence or they at least have the capital and the wherewithal to be able to come to the table with some innovative ways of doing business that are going to benefit us.
CARTER-KNIGHT (TIMBERLAND): Going into 2005, the price wars will exist, but they will be another part of the market. Some will want to differentiate themselves. Lead time will become an important part for the retailer. They'll want goods in fast to be able to turn them around fast and move on to the next style. . It will be very important to have six-week lead times vs. 120-day lead times. So regions close to the U.S. will definitely be important. The cost savings might not be there, but in terms of getting a great lead on your product and turning around goods, at low inventory, it will be beneficial for the retailers to stay in this region [Western Hemisphere] as far as global sourcing.
HERBST (ARC'TERYX): For us, flexibility is very important. We work mostly with our own factory, and the ability to introduce at the last minute into the market [is a competitive advantage]. We can take things to our customers which are just coming out of the design room. . So there is a place for the manufacturers on this continent, which is our main concern. The other thing that I wanted to touch on is technical innovation, which is our core business. This technical innovation is more easily accomplished at the factory which is right next door. The thing that really is changing the nature of our [business is] the loss of the textile infrastructure, and the loss of the coaters and finishers.
KIES (LANDS' END): Lands' End is interested in looking at vertical [producers]. A manufacturer that can supply its own raw materials, fabrics and trims has much more of an advantage over someone who cannot. At Lands' End, we only source through manufacturers that can supply a full package. That's extremely important to the way we do business. We do have some suppliers that may not be vertical, but they are forming ventures with other suppliers, whether it's a trim or elastic [business], etc. to make themselves vertical within their country. That's been a big benefit to them, and it means a lot to us as well.
The raw materials quandary
Apparel: Are there enough fabrics and trims accessible in the United States and Western Hemisphere, or do you think the industry could ramp up as needed to meet your demand?
KRUMMEL (TIMBERLAND): It is a big concern, the demise of the fabric supply in this region as well as the legislation that doesn't currently support using this region effectively. Mergers of the fabric giants can be a good thing, but they also can limit where you can produce. If you're getting your fabric from Mexico, you can't spread that around the region.
KIRK (TAMODA): There are a lot of great companies out there available for fabrics and trims that have been around a long time. We use them daily, and we have a lot of very high-end customers that keep growing their business every year in the wake of these decreasing prices. And they're putting out a great product. So I don't see a problem with sourcing of these different fabrics and trims. There is a huge problem, however, that they cost a lot more money.
CARTER-KNIGHT (TIMBERLAND): We have had difficulties in sourcing trim and fabrics in this region. With flannels, for example, it's been a difficult ride in terms of raw materials. If you don't put prices into the equation, then it's not the reality; it's the picture that you're looking at. If flannels are available in this area, and it's impossible for people to . bring them to market, then the reality is, there are no flannels in this area. . When you're talking about moderate to low markets, and you're not talking about high end, there are things that inhibit you in terms of raw materials.
Apparel: Are U.S. fabric minimums going to change anytime soon?
KEENAN (LANDS' END): In terms of looking at minimums, one of the things that we've found is that it's really based upon forming relationships with the right partners. There are some manufacturers that can certainly meet our needs and have the capacity to handle smaller minimums. . [Likewise,] you can get full package just about anywhere. . It's available in Canada, it's available in Asia, etc. It's finding the right resource to meet your local needs.
KRUMMEL (TIMBERLAND): With regard to the consolidation of fabric mills, I'd like to ask: Is it "bigger is better," or will this really start to change the industry to give us some more flexibility until that strategy plays out?
KIES (LANDS' END): The merging of these big fabric groups can be a benefit, but it can also be a detriment if we get to the point where it almost becomes a monopoly because there's hardly anyone else left. They could keep the prices high because there's no place else to go, except for offshore. That's one thing that they're going to have to figure out. It goes right along with the large minimum. People can't deal with the benefit except for possibly on first-time orders. But as follow-up orders come through, especially in a business like Lands' End where so we're catalog driven, we don't have the kind of re-orders to be able to fulfill a minimum fabric purchase.
The use of technology
Apparel: Would anyone like to address how the use of technology has helped you improve cycle time, quality, etc.? How about things that have or haven't worked for you, things you are investigating, or wishing for, when it comes to technology?
KIES (LANDS' END): Regarding quality, price and lead time, as far as technology is concerned, there are a lot of new software programs out there that will help manufacturers track and follow production from start to finish and communicate that back to me, the purchaser, with day-to-day input. That makes life a lot easier. . [Technology] is the best one thing that can really help from a service standpoint, and it can help from a price standpoint because it's going to make everybody more efficient. New technology, such as that employed by pattern making services and for communicating patterns, makes things more efficient and will help with the quality.
KEENAN (LANDS' END): The vendor's ability to integrate with the software that you have is also very important . and is something that can provide a real added value. Being able to transfer patterns back and forth is key to making that happen as well.
CARTER-KNIGHT (TIMBERLAND): We saw a need to shorten the lead time, or turnaround time, for color approval in the development process. We now have a central location where we have a color specialist in our U.K. office. He is working with a technology that enables him to e-mail the formulas to mills that have the same [technology in place]. They're in turn taking those formulas, using them to dye up the lab dips and faxing back the data on the lab dips. So instead of reviewing a swatch of color, we're comparing the [spectral] data from the mill, e-mailing that back to him and he's able to look at the data and know if the color is approvable or not. We're getting better approval ratios on lab dips and consistency of color when it gets down to bulk and, of course, reducing the development time for color approval.
KIRK (TAMODA): From the manufacturer's end of this, we've been using a lot of the Gerber products, the Gerber CAD/CAM system and the AccuMark system, and that's been really great because we can e-mail patterns back and forth and make modifications very quickly. And the high efficiency of our Gerber laser cutter has cut our costs anywhere from 20 percent to 30 percent. . We're trying to do that with every operation at Tamoda so that we can be as efficient as possible.
HERBST (ARC'TERYX): We're on Gerber, but we do have some companies that we deal with [that are using] Lectra and other patterning systems, and I wish that the translation software was a little more reliable and consistent because we find that we can't be 100 percent certain that it has gone through the intermediate step when it comes out the other side. . That's got to be worked on, and it's got to have a solution that's absolutely bulletproof sometime in the near future.
More on price, quality and social responsibility
KIRK (TAMODA): As a North American manufacturer, there's not a customer we've worked for or haven't worked for in the past 10 years that would not love to use us. We are a very quick turnaround factory, we have a pattern maker who has been working in the business for 30 years. We've got the best quality, the best service, we've won numerous awards, etc. But it comes down to the issue of price. We can offer all this and so much more, but it comes at a price, and I'm just wondering how [the price card] fits into the sourcing ideas of the people here. It seems like the strongest companies that we work for, some of the biggest ones out there, continue to give us more and more volume every year, when we have so many other customers telling us, "We can't use you because we'll never make it at a retail level." And they're talking about not being able to compete with the big, strong customers that are giving us more and more work. It seems that everyone's chasing the price game, and I don't think that will work. It didn't work for Britannia, and it hasn't worked for a lot of companies chasing the price game in Asia, competing with Wal-Mart. No one can compete with Wal-Mart or Old Navy on price.
KEENAN (LANDS' END): One of the things we've always focused on is quality and meeting our customers' needs and expectations. So we're not chasing the price. That's not what we're about, which is really the philosophy of where Lands' End has always been. . [Also,] sourcing has kind of "evolutionized" with us over the last couple of years. . What's really changed things in some ways is the focus on compliance first, making sure that we're with the right partners, and that they're adhering to compliance on all levels throughout quality and the human rights piece. . If there's a company that we don't feel comfortable doing business with, we'll exit that business relationship, but more importantly, we'll work with them to improve where we find some examples of something that's not working or not meeting our expectations.
KIES (LANDS' END): Compliance today is probably 50 percent of what we do. It's not that the manufacturer has to meet our needs in terms of making a product, for the right timeframe, at the price we need, but it's also that they have to meet the human rights standards and those aspects of manufacturing.
CARTER-KNIGHT (TIMBERLAND): In response to the issue of price chasing, it goes back to the old saying: An item is worth what someone is willing to pay. A lot of it is knowing your customers. In knowing your customers, you know what they see value in, in terms of a product, and what they're willing to pay. . If you don't listen to the customer, you could be out of business soon. So, price IS an issue.